As the first trading week of April unfolds, both bonds and stocks witnessed a decline prompted by increasing speculation around a more cautious approach to Federal Reserve interest rate cuts. This market sentiment is partially fueled by the surprising expansion in U.S. manufacturing activity, the first instance since September 2022.

In anticipation of Federal Reserve Chair Jerome Powell's speech on Wednesday, investors are parsing his recent remarks with interest. Powell emphasized the need for conclusive evidence of price stabilization before considering any reduction in interest rates, highlighting a cautious stance toward ensuring inflation is firmly under control. This approach underscores the unstable balancing act facing the Federal Reserve: the risk that premature easing could inadvertently stoke inflationary pressures, yet excessive delay may trigger an unexpectedly sharp economic downturn.

Amidst these financial deliberations, global geopolitical events also cast a shadow over market dynamics. Notably, the repercussions of an Israeli airstrike targeting the Iranian embassy in Syria have propelled gold prices to highs, signaling investor flight to perceived safe-haven assets amidst escalating tensions.

In economic news this week, we will get a lot of Fed Speak for more clues on where monetary policy might head. Notably, we will get the nonfarm payrolls report on Friday which is expected to show a slight decline in the growth of payrolls from +275,000 to +200,000.

We are seeing another rotation into value names as Large Cap is showing a decline in the rate of change. Bonds are seeing a slight change in direction, but still remain weak. Industrials, Materials, Financials, and Energy are the strongest sectors. Communications, Consumer Cyclical, and Technology - the three strongest sectors over the last year - are the laggards.